AN ACT CONCERNING PROPERTY TAX RELIEF FOR CERTAIN ELDERLY HOMEOWNERS.

This bill allows municipalities to freeze the property taxes on homes owned by certain elderly people. To be eligible, the homeowner or his spouse must be age 70 or older and have lived in the state at least one year. The freeze continues for a surviving spouse who is at least age 62 when the homeowner dies. Homeowners must meet the same income limits as apply to the existing state-reimbursed “circuit breaker” program, which currently gives qualified homeowners age 65 or over a tax credit against the property taxes on their homes. Those income limits are currently $ 27,700 annually for individuals and $ 33,900 for married couples, adjusted annually for inflation. Under the bill, people whose taxes are frozen can still qualify for other property tax relief programs.

The bill also allows the town to impose asset limits for eligibility and to put a lien on the property. It establishes application procedures and deadlines and imposes penalties for false statements. It does not provide state reimbursement for lost revenue to a town that chooses to offer this optional tax freeze.

The bill repeals provisions that allows municipalities to phase-in the effects of their property revaluations over as many as three years. It instead allows towns to adopt a phase-in for up to five years, using one of two implementation options. It appears that other municipalities (unconsolidated boroughs and cities) are precluded from implementing phase-ins.

Under current law, the municipality's legislative body must authorize the phase-in and set its term. The bill additionally requires the town's legislative body to select one of two implementation options. It allows the town to phase in part, rather than all, of the assessment increase. It assigns the responsibilities for making these choices to the board of selectmen in town meeting towns. The bill allows the legislative body or board of selectmen to discontinue the phase-in. The bill modifies how property built during the phase-in is assessed. It requires the town's chief elected official to notify the Office of Policy and Management (OPM) secretary within 30 days after the legislative body decides to implement or discontinue the phase-in. Failure to do so subjects the official to a $ 100 fine.

*House Amendment “A” (1) adds the revaluation phase-in provisions and (2) makes minor changes in the tax freeze provisions.

EFFECTIVE DATE: October 1, 2006, and applicable to assessment years beginning on or after October 1, 2006.

The bill allows any municipality to freeze qualified homeowners' real estate taxes at the level of the tax due for the assessment year beginning October 1 of the year immediately preceding the year of the application date. For subsequent years, if the town lowers taxes, those lower taxes apply to the applicant. A town may freeze taxes only with approval from its legislative body. The freeze can also apply to a tenant for life or for a term of years who is liable for property taxes. It can continue for the homeowner or tenant's surviving spouse or anyone who has a joint interest in the property with the owner at the time of the owner's death, as long as the person continues to qualify under the bill.

After the first year the claim is filed and approved, the participant must reapply every two years on a form prepared by the town assessor.

1. as of the prior December 31, (a) be at least age 70 or have a spouse living with him who is at least age 70 or (b) be at least age 62 and the surviving spouse of a taxpayer who was entitled to this tax relief at the time of his death, provided they were living together at the time of the taxpayer's death;

2. occupy the property, including a mobile manufactured home, as his or her home;

3. have lived in Connecticut for at least one year before filing the claim (this applies to either spouse);

4. have qualifying income (both taxable and nontaxable) in the immediately preceding tax year that does not exceed the limits for the “circuit breaker” Elderly/Disabled Tax Relief Program (currently $ 27,700 for individuals and $ 33,900 for married couples, adjusted annually for inflation); and

5. submit evidence of his income, in a signed affidavit, to the assessor in the town where he is filing the application.

The bill exempts Medicaid payments made on the owner's or his spouse's behalf from counting as income for eligibility purposes. It also exempts the homeowner's spouse's income if the spouse resides in a health care or nursing home facility in Connecticut and the facility receives Medicaid payments for the spouse.

Additionally, the bill allows the town to (1) impose asset limits for eligibility for this freeze program and (2) place a lien on the property for the total tax relief granted plus interest at a rate the town determines. It gives such a lien priority in the settlement of the person's estate. (see BACKGROUND)

The bill specifies that eligibility for this tax freeze does not disqualify the person from other tax relief programs for which they are eligible (the “circuit breaker,” the current elderly tax freeze, and the local option tax relief for seniors over age 65 and disabled people).

The bill requires that the tax on the qualifying property be the lower of the tax due for (1) the assessment year beginning October 1 immediately preceding the year of the initial application or (2) any subsequent assessment year. If the property's title is in the name of the qualifying homeowner or spouse and anyone else, the claimant is entitled to pay his fractional share based on the bill's freeze formula, and the other owners must pay their fractional share without regard to the freeze.

If a homeowner benefiting from a tax freeze transfers his interest in the property to someone else on or after November 1, but before August 1, in an assessment year, either voluntarily or involuntarily, the tax relief benefit for that year must be prorated. But if the transfer happens in October, the homeowner is disqualified from tax relief for that assessment year. If the transfer happens in August or September, there is no proration and the homeowner receives the full benefit.

The bill gives the person to whom the property is transferred 10 days after the conveyance date to notify the assessor. If the assessor receives no notification or learns of the conveyance on his own, he can determine that such a transfer has occurred, calculate the amount of tax relief to which the original homeowner is entitled, and notify the tax collector of the reduced benefit amount. When the tax collector receives the assessor's notice after the town's tax due date, he has 10 days to mail or hand a bill to the transferee containing the additional amount of tax due. This additional tax is due, payable, and collectible subject to the same liens and processes as other property taxes, but must be paid in an initial or single installment within 30 days after the tax collector mails or hands the bill to the new owner and in equal amounts for any remaining, regular installments.

Applicants must file their claims with the assessor in the town where the property is located, in whatever form and manner the assessor requires. The claim must be filed during the period from February 1 to and including May 15 of the year that the claim is for and must include required substantiating information. The bill allows taxpayers to apply for an extension before August 15. The assessor can grant such an extension if (1) there are extenuating circumstances due to illness or incapacitation as shown in a physician's certificate or (2) he decides there is good cause for the extension.

The taxpayer must give the assessor a copy of his and his spouse's federal income tax return, if the spouse files separately, for the taxable year immediately preceding submission of the application. If the taxpayer does not have to file a federal income tax return, he must provide whatever proof of income the assessor requires. The assessor must examine each application and the other information submitted and decide whether to approve the application.

After the taxpayer's claim has been approved for the first year, the taxpayer must file such applications and supporting information biennially. The assessor must notify each taxpayer of the reapplication requirement by February 1 of the year in which it is required and enclose a copy of the application form. The taxpayer can submit the application by mail provided the assessor receives it by March 15. By April 1, the assessor must again notify any such taxpayer for whom he did not receive an application by March 15 about the application requirements. Then, the taxpayer has until May 15 to submit the application in person or, for reasonable cause, through another person acting on his behalf.

Anyone who knowingly makes a false application to claim tax relief is subject to a fine of up to $ 500. Anyone who fails to disclose all relevant matters or makes a false statement with the intent to defraud must refund to the town all improper tax relief.

Under current law, the phase-in must be based on the property's assessment ratio, i. e. , the relationship between its assessed value and its fair market value. It must bring the assessment ratio up to the ratio required by law (70%) in equal increments over the life of the phase-in. The annual increments can be equal in terms of the absolute increase in the assessment ratio or in percentage increase in this ratio. Under the first scenario, the assessment ratio for affected properties could be 50% in the first year of the phase in, 60% in the second, and 70% in the third. Under the second scenario, the assessment ratio could increase by 10% (as opposed to 10 percentage points) each year.

Another provision allows municipality to phase in all or portion of an assessment increases over a period of up to three years, with the assessment increased in equal amounts each year. Under this options, the municipality's legislative body can discontinue the phase in.

The bill repeals these provisions and instead establishing a single option that allows a town to phase in revaluation for up to five years. The bill allows a town to phase in part of the revaluation increase. If it does, the legislative body or board of selectmen must establish a factor, which cannot be less than 25%, and apply this factor to all parcels in town, regardless of their property classification. The town must multiply this factor by the total assessment increase for the parcel to determine the amount of the increase that will not be subject to the phase. Thus, a town could choose to implement 50% of the assessment increase immediately and phase in the remaining 50% over five years.

Under the first implementation option, the assessment of each parcel for the assessment year before the one in which revaluation is effective must be subtracted from the assessment of the parcel in the revaluation year. The annual amount of the increased increase for the parcel is the total of such subtraction divided by the number of years of the phase-in term. Thus, if the pre-revaluation value of a parcel is $ 100,000 and its new value is $ 150,000, and the town chooses a five year phase-in, the assessment would increase by $ 10,000 each year ($ 50,000 divided by 5). But, if a municipality chooses to phase in part of the assessment increase for each parcel, the amount of the increase that is not subject to the phase-in is not reflected in this calculation.

Under the second option, the ratio of the total assessed value of all taxable real property for the assessment year before the one in which revaluation is effective and the total fair market value of such property as determined from records of actual sales in said year, must be subtracted from the 70% rate of assessment specified in current law, and the annual incremental rate of assessment increase applicable to all parcels of real property shall be the result of such subtraction divided by the number of years of the phase-in term. Thus, if the total assessed value in the pre-revaluation year was 50% of fair market value, the 20% difference between this number and the 70% rate specified in law would be phased in over the number of years set by the legislative body or board of selectmen. Before determining the annual rate of assessment increase, a town that chooses to phase in part of the assessment increase for each parcel must multiply the result of this subtraction by the proportion of the increase that is not subject to the phase in, to determine the rate of assessment that is not be subject to the phase in.

Under current law, new construction first assessed during the phase-in period must be initially assessed at the rate applicable to the phase-in method the municipality has chosen (percentage point or percentage increase) at the time of the initial assessment. Afterwards, such property is subject to the assessment rate applicable to all real property on the municipality's assessment list.

Under the bill, the assessment of new construction must be determined in the same way as comparable property is assessed, so that the total of incremental increases that apply to the comparable properties are reflected in the assessment of the new construction, prior to the prorating required by law. By law, a property that gets its certificate of occupancy, or that is first used for its intended purposes six months into an assessment year is subject to half of the tax that would apply to a comparable property on the assessment list on the first day of the assessment year.

The bill allows the legislative body or board of selectmen to discontinue the phase-in. It may do so at any time before the phase in is completed, so long as it is done by the assessment date for the assessment year in which the discontinuance is effective. In the following assessment year, assessments must reflect the values of real property established by the revaluation, subject to (1) additions for new construction and reductions for demolitions occurring after revaluation and by the date of its completion or discontinuance and (2) the rate of assessment applicable in that year.

The state currently reimburses towns for two required real estate property tax relief programs for elderly homeowners.

The existing Elderly/Disabled Tax Freeze Program, begun in 1967, has not accepted new participants since 1979. The people who were in the program when it closed continue to receive benefits. It generally freezes property taxes for homeowners age 65 and over who have $ 6,000 or less in annual qualifying income, which is considered federal adjusted gross income plus tax-exempt interest. Qualifying income excludes Social Security income, U. S. Postal pensions, and certain other types of income. But there are limited situations where the homeowner's frozen tax bill can still increase (CGS § 12-129b to 129d).

The Elderly/Disabled Tax Relief Program (often informally referred to as the “circuit breaker” program) currently gives homeowners age 65 or over with annual incomes up to $ 27,700 for individuals and $ 33,900 for married couples a tax credit against the property taxes they owe on their home. The credit is calculated on a sliding scale based on the applicants' annual income and ranges between 10% and 50% of the tax owed, with a minimum credit of $ 150 and a maximum of $ 1,250. To be eligible, the applicant must (1) be age 65 or older or disabled, have a spouse who is age 65 or older, or be at least age 50 and a surviving spouse of a person who at the time of his death was eligible for the program; (2) occupy the property as his home; and (3) have lived in Connecticut at least one year before applying for benefits (CGS § 12-170aa). (The state also reimburses towns for a similar tax relief program for elderly and disabled renters. )

Unreimbursed Local Option Tax Abatement Programs for Elderly and Low-Income People

In addition, towns may provide additional tax abatement benefits to their elderly without state reimbursement. The law allows towns to provide optional property tax relief to seniors over age 65 and disabled people (CGS § 12-129n). It lets the town set maximum income limits for this tax relief. Thus, towns may provide relief to homeowners already receiving tax relief under the circuit breaker program as well as to those who do not meet that program's income criteria. But the overall amount of annual tax relief towns can provide under this authority is limited to 10% of the total value of real property in the town. And the total value of tax relief a particular homeowner can receive under this and the state programs cannot exceed his annual tax. The town must put a lien on the property if the amount of tax relief is more than 75% of the tax owed, and the law places several other restrictions on optional unreimbursed local programs.

In addition, towns are allowed, with approval from their legislative body, to abate the amount of property taxes for any homeowner regardless of age, if the tax exceeds 8% of the owner's income for a given year (CGS § 12-124a). The owner must agree to reimburse the town for the abated amount plus interest when the owner dies or the property is sold. (This last program is not one of those the bill allows recipients of the proposed new elderly tax freeze to still be eligible for. )

Yea

Nay

(03/02/2006)

Yea

Nay

(04/04/2006)